I have been debating what to use as my music source as I am upgrading my base stereo to Stage II system from MusicarNW next month.

What are most of you guys using for music source?

CD would probably sound bet but this is not very convenient...USB stick seems ok but there are filters between USB port and head unit and does the music info show up?.....BT doesnt sound very good at all when using device like BB or Belkin.

Guess we need some device where we can plug a router directly to the amplifier and stream the music on our phones to the router like a apple airport express or Apple TV like device.

Nothing wrong with high bit rate mp3
If you have usb then you can put that in any format the head unit understands. What filters its pure digital till it hits the Dacs .
which seems like the best solution.
Most of the internet broadcast stuff is low quality or if its high quality
the bit rate costs are prohibitive as in spotify pay for it version, and mobile reception over most of the networks that broadcast it would probably be questionable. Also the people that own the mobile networks are retracting
the all you can eat data plans or putting some kind of caps or restrictions
on them if you use a lot of data.
HD Radio isn't to bad if you happen to live in area where there is a strong
signal and a decent selection of stations.

The aux input is not good but when you get your new system it will sound
a whole lot better. Also I have some doubt that a 50 dollar blue tooth aux
adapter is very good compared to some of the stuff built into a good HU or one of the better adapters like a Mobridge or Dension.

If you want really Hi Fi maybe you should look up Neil Youngs attempt at Mobile studio quality sound . He had a 24 bit device designed called the Pono
but it hasn't taken off yet.

You get that airplay system working ok???...thats what I really want to do also...but dont think the amp I am getting has optical inputs(ARC 75 X 4 amp).

I have the premium Spotify service and would prefer to use that as my source.

Not yet. When it works it sounds amazing...

iPhone 4S has AirPlay issues, but the AE may also be to blame since I cannot get 100% skip-free playback with other Apple devices such as iPad, iPod and Macbook.

I may have to bite the bullet and get an ATV since they supposedly have less issues, or I may even try a first gen AE.

4s uses only the 2.4ghz portion of 802.11n. That is your problem. Every BT device and most wifi stations are blasting you @ 2.4Ghz and a moving airport express just cant keep up with its surrounding environment. (Cant switch channels often/seamlessly)